in Re Stella D Jackson Living Trust ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
In re STELLA D. JACKSON LIVING TRUST.
WELLS FARGO BANK, N. A., Trustee of the UNPUBLISHED
STELLA D. JACKSON LIVING TRUST, October 22, 2015
PATRICIA SEELEN, ANDREA JACKSON, and
HOLLY JACKSON,
Appellees,
V No. 321070
Marquette Probate Court
JAMES C. JACKSON, LC No. 10-031838-TV
Appellant.
In re CLIFFORD W. JACKSON & STELLA D.
JACKSON REVOCABLE LIVING TRUST.
WELLS FARGO BANK, N. A., Trustee of the
CLIFFORD W. JACKSON & STELLA D.
JACKSON REVOCABLE LIVING TRUST,
PATRICIA SEELEN, ANDREA JACKSON, and
HOLLY JACKSON,
Appellees,
V No. 321072
Marquette Probate Court
JAMES C. JACKSON, LC No. 10-031839-TV
Appellant.
Before: M. J. KELLY, P.J., and MURRAY and SHAPIRO, JJ.
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PER CURIAM.
In this case concerning trust documents and the intent of the settlor, now deceased,
appellant, the decedent’s son and possessor of a residual interest in the decedent’s estate, appeals
as of right from the probate court’s order interpreting the trusts here at issue to grant duplicate
gifts to the individual appellees, the decedent’s granddaughters. We reverse and remand for
entry of an order consistent with this opinion.
I. FACTS
This case returns to this Court after an earlier claim of appeal resulted in a remand. This
Court’s earlier opinion set forth the underlying facts:
On August 1, 1997, Clifford Jackson and Stella Jackson signed a trust agreement
creating the [Clifford W. Jackson and Stella D. Jackson Revocable Living Trust
(CJRLT)] and jointly conveyed unspecified property to the trust. Wells Fargo’s
predecessor was named the trustee . . . .
In paragraph SECOND, the Settlors retained the “right to use or to direct
the payment of any part or all of the net income and the principal of this trust” for
any purpose, as well as the right to “revoke or amend [in writing] this instrument
. . . [which] is personal to the Settlor, or the survivor thereof.” In paragraph
THIRD, the agreement stated that, upon the death of either Settlor, the assets of
the CJRLT would be divided into two separate trusts: (1) the Family Trust; and
(2) the Marital Trust. While the Family Trust contained a provision for gifts to
beneficiaries, the Marital Trust contained no similar provision. After the
distributions were made, the remaining assets were to be distributed in equal
shares amongst the Settlors’ surviving children. . . .
The CJRLT subsequently was amended several times to provide for
additional distributions upon the death of the Settlors. On December 9, 1998, the
Settlors amended paragraph THIRD of the CJRLT to change the amount provided
for each of their surviving grandchildren in the Family Trust from $100,000 to
$250,000. The Settlors made a second amendment on the same day, amending
paragraph SECOND of the CJRLT to include distributions to the following
beneficiaries: (1) $100,000 to Bethel Lutheran Church (upon Clifford’s death);
(2) $100,000 to St. John Church (upon Stella’s death); (3) $100,000 to Ishpeming
School Board; and (4) $5,000 to the Salvation Army. On July 26, 2000, the
Settlors made a third amendment to the CJRLT, amending paragraph THIRD by
adding a $5,000 distribution from the Family Trust to Shawn Jackson (a
grandson) upon the death of both Settlors. On May 9, 2001, the Settlors made
their final joint amendment to the CJRLT, requiring that any distribution due to
John W. Jackson be held in trust and distributed pursuant to the trustee’s
discretion. . . .
Clifford Jackson passed away on March 3, 2003. To acquire preferential
tax treatment for the assets that, pursuant to the provisions of the CJRLT and by
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virtue of Clifford Jackson’s death, were placed into the Family Trust, Stella
Jackson signed, on November 13, 2003, a document captioned “Disclaimer.” The
Disclaimer specifically noted that paragraph SECOND of the CJRLT could
potentially be interpreted to render taxable the assets distributed to the Family
Trust. In signing this document, Stella Jackson declared her intent as follows:
My intent in executing this disclaimer is to insure that the assets
distributed to the FAMILY TRUST do not qualify for the marital
deduction, rather, that these assets be fully taxable in the federally
taxable estate of Clifford W. Jackson and fully utilize his appli-
cable exclusion amount under the Code.
Stella Jackson then stated:
With due consideration of the foregoing, I irrevocably and
unqualifiedly disclaim any and all rights that I may have under the
terms of Paragraph SECOND of the trust, specifically, I disclaim
the right to use or direct the payment of any part or all of the net
income and the principal of trust assets under that Paragraph as
well as the ability to revoke or amend the Trust.
Stella Jackson explicitly exempted from disclaimer: (1) any of her rights under
the Marital Trust; and (2) her right to receive income from the Family Trust. . . .
Stella Jackson executed and delivered this Disclaimer to the trustee (Wells Fargo),
who accepted it and, by virtue of the disclaimer of any “ability to revoke or
amend the Trust,” treated the CJRLT as irrevocable. . . .
On May 10, 2005, Stella Jackson signed a document creating the [Stella
D. Jackson Living Trust (SJLT)], which purported to “amend and restate” the
CJRLT “in its entirety” . . . . Wells Fargo was appointed trustee for this trust.
The distributions and inheritance to the Settlors’ children specified in Article V of
the SJLT were substantially, although not entirely, identical to those stated in the
CJRLT, except that the manner of distribution differed slightly, and the SJLT also
added a $5,000 distribution to St. Vincent DePaul. Since Wells Fargo treated the
prior Disclaimer as having rendered the Family Trust irrevocable, it subsequently
administered both the CJRLT and Stella Jackson’s new SJLT as two independent
trusts. The annual statements indicated the existence and maintenance of two
separate trusts; these documents had been provided to Stella Jackson since
2004/2005 . . . .
Stella Jackson passed away on March 6, 2009; afterwards, Wells Fargo
made distributions from the two separate trusts (instead of one single, fully
restated trust), since it believed the Family Trust in the CJRLT was irrevocable.
This resulted in additional payments to the Settlors’ grandchildren totaling
$755,000. On September 16, 2009, Appellant James Jackson contacted Wells
Fargo via phone and expressed concern over the additional distributions that he
noticed in the August 2009 annual statements; he threatened legal action. . . .
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In 2010, Wells Fargo filed these petitions with the probate court, asking
the court to: (1) authorize the contested distributions and approve Wells Fargo’s
administration of the trust; (2) provide instructions on how to proceed; and (3)
discharge Wells Fargo as trustee once all funds were distributed. Appellants
objected . . . .
The probate court issued an opinion and order, noting that the primary
issue in this case was the validity of the Disclaimer. However, the court
determined that it was the effect of the language purporting to renounce Stella
Jackson’s right to amend the CJRLT—not the fact that it was titled
“Disclaimer”—that was relevant to this case. The court found that Stella Jackson
had effectively renounced her right to amend the CJRLT, and it therefore (1)
decided that the SJLT was ineffective in restating the Family Trust portion of the
CJRLT; and (2) found the distributions made by Wells Fargo from the Family
Trust and the SJLT to have been authorized. [In the Matter of the Clifford W
Jackson & Stella D Jackson Revocable Living Trust, unpublished opinion per
curiam of the Court of Appeals, issued October 16, 2012 (Docket No. 302489), pp
2-5 (selected parentheticals omitted).]
This Court concluded that the “Disclaimer,” though imperfectly labeled,1 “operated as an
amendment to the CJRLT.” Id. at 6. This Court further identified the clear intent of the settlors
in providing for the creation of the Family and Marital “sub-trusts” as “to . . . take advantage of
certain federal tax exemptions at death, while still providing support for the surviving spouse.”
Id. at 8. This Court additionally identified as the clear intent behind the Disclaimer “to insure
that the assets of the Family Trust were not Stella’s assets, but rather were included in Clifford
Jackson’s estate (with applicable exclusions), for tax purposes.” Id.
This Court affirmed the trial court’s determination that the Disclaimer effected an
amendment of the CJRLT, but held that the trial court “improperly limited the effect of the
Disclaimer amendment” by failing to appreciate that “Stella Jackson had not merely eliminated
her ability to further amend the Family Trust that had been created under the CJRLT, but rather
had eliminated her ability to amend ‘the Trust,’ ” meaning the entire CJRLT. Id. at 10. This
Court agreed with the trial court that the Disclaimer operated as a renunciation of Stella
Jackson’s right to amend the CJRLT, but held that as the result of that operation “the SJLT was
ineffective.” Id. This Court additionally noted that “Stella Jackson retained all rights given to
her under paragraph THIRD of the CJRLT, including ‘the power to appoint all or any part of the
principal of the Marital Trust[,]’ but opined that “it is impossible to ascertain from the SJLT any
intent to make such an appointment in creating the SJLT.” Id. Accordingly, this Court held that
the trial court correctly determined that the trustee’s distributions from the Family Trust were
1
This Court noted that “Stella Jackson did not disclaim her ‘survivorship interest in joint
property’ ” in the sense that “disclaim” is normally used in the estate context, but rather
relinquished “her own right to amend or revoke the CJRLT.” In the Matter of the Clifford W
Jackson & Stella D Jackson Revocable Living Trust, unpub op at 6.
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authorized, but that the court “erred in finding authorized the distributions by the Trustee from
the SJLT.” Id. This Court thus vacated the trial court’s decision and remanded this case for
further proceedings consistent with its opinion. Id.
On remand the granddaughters petitioned the trial court to reform the Disclaimer so that
it would apply to only the Family Trust component of the CJRLT, not the Marital Trust, on the
ground that this reading better comported with Stella Jackson’s intent. Following an evidentiary
hearing, the court concluded that “there was clear and convincing evidence that Stella Jackson
intended to have the Disclaimer affect the Family Trust only and to make two distributions of
$250,000 to her Granddaughters—one via the CJRLT and one via the SJLT.” The court
continued as follows:
The Disclaimer, as an amendment to the CJRLT, is ordered to be reformed
. . . so that only the family portion of the CJRLT is deemed irrevocable. Having
found it was Stella’s intent to only disclaim the family portion of the CJRLT, the
SJLT would not be ineffective and would allow Stella’s intent to be carried out.
The distributions to the Granddaughters as well as distributions to Shawn Jackson,
St. John’s Church, Ishpeming Schools, Salvation Army, and St. Vincent de Paul,
will be allowed.
This appeal followed.
II. LAW OF THE CASE
Appellant argues that the trial court on remand departed from this Court’s earlier opinion
in violation of the doctrine of law of the case. As a question of law, this Court decides de novo
whether a trial court correctly followed this Court’s remand order. Schumacher v Dep’t of
Natural Resources, 275 Mich. App. 121, 127; 737 NW2d 782 (2007).
Under the law of the case doctrine, an appellate court ruling on a particular
issue binds the appellate court and all lower tribunals with regard to that issue.
The law of the case mandates that a court may not decide a legal question
differently where the facts remain materially the same. The doctrine applies to
questions specifically decided in an earlier decision and to questions necessarily
determined to arrive at that decision. [Webb v Smith, 224 Mich. App. 203, 209;
568 NW2d 378 (1997) (citations omitted).]
Accordingly, “[i]t is the duty of the lower court . . . , on remand, to comply strictly with the
mandate of the appellate court.” Schumacher, 275 Mich. App. at 128 (internal quotation marks
and citation omitted). “A trial court fails to follow the law of the case when it revisits a matter
on which this Court has already ruled.” Id.
A. REFORMATION OF DISCLAIMER
The trial court granted the granddaughters’ motion to reform the Disclaimer under the
authority of MCL 700.7415, which provides as follows:
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The court may reform the terms of a trust, even if unambiguous, to
conform the terms to the settlor’s intention if it is proved by clear and convincing
evidence that both the settlor’s intent and the terms of the trust were affected by a
mistake of fact or law, whether in expression or inducement.
The trial court stated, “Having found it was Stella’s intent to only disclaim the family portion of
the CJRLT, the SJLT would not be ineffective and would allow Stella’s intent to be carried out.”
The court thus treated the Disclaimer as having amended the CJRLT to render only its resulting
Family Trust no longer subject to amendment or revocation, leaving Stella Jackson free to
amend, revoke, or restate the Marital Trust by way of establishing the SJLT.
We hold that the trial court erred in treating the scope of the Disclaimer as a question
subject to determination on remand. This Court, after concluding that the Disclaimer was in fact
a valid amendment to the CJRLT, went on to state as follows: “The question then becomes
whether the amendment rendered the CJRLT irrevocable by Stella Jackson, and not subject to
further amendment, and thus not able to be amended and restated as the SJLT. We conclude that
it did.” In the Matter of the Clifford W Jackson & Stella D Jackson Revocable Living Trust,
unpub op at 7. This Court thus decreed that the Disclaimer entirely extinguished Stella’s
prerogative to amend the CJRLT, including by way of attempting to restate it through a
successor trust whose terms at all departed from those of the original trust. This Court
elaborated as follows:
By the Disclaimer, Stella Jackson had not merely eliminated her ability to further
amend the Family Trust . . . , but rather had eliminated her ability to amend ‘the
Trust.’ . . . [T]he Disclaimer amendment defined the “Trust” as the CJRLT (not as
the Family Trust). Consequently, as a purported amendment of the CJRLT, the
SJLT was ineffective in its entirety.” [Id. at 10.]
This Court’s categorical statement that the Disclaimer rendered Stella Jackson powerless to
amend the entire CJRLT did not leave open the option in further proceedings of determining
whether the Disclaimer was intended to apply to only the Family Trust.
Concerning the trial court’s decision to give force to the SJLT, the court stated, “The
Court of Appeals was clear in its finding that as a trust, the SJLT was ineffective. The Court of
Appeals did not go further and find what, if anything, the SJLT was.” The trial court then
recognized as still open questions, “Was it . . . an expression of Stella’s intent that she give the
contested second specific gift of $250,000 to each Granddaughter or was the SJLT . . . merely a
restatement of the CJRLT and was Stella Jackson simply amending the entire joint trust to
change her son John’s distribution and add a new charitable gift to St. Vincent de Paul?” This
Court, however, held that “[b]y its terms, the SJLT . . . purports to ‘amend[] and restate[] [the
CJRLT] in its entirety.” Id. (bracketed interpolations in the original). This Court thus identified
the intent behind the SJLT, therefore answering what the trial court on remand regarded as a
question still pending.
Despite acknowledging this Court’s determination that the Disclaimer rendered the
subsequent SJLT without effect, the trial court nonetheless took evidence to arrive at factual
determinations supporting an equitable decision to reform the Disclaimer to mean something
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other than what this Court decided it meant, with the effect of reviving the SJLT as an
independent trust, which this Court had declared an ineffective attempt to amend the CJRLT.
Because this Court determined without equivocation that the Disclaimer rendered the entire
CJRLT not subject to amendment, not just that part of it that established the Family Trust, the
trial court erred in treating the scope of the Disclaimer as a question that remained open. The
court then compounded the error by answering the question in a way at variance with our
previous conclusion, then using that result as a means of declaring the SJLT to be something
other than what we declared it to be, and thus giving effect to what this Court had declared
ineffective. For these reasons, we conclude that the trial court failed to abide by the law of the
case.
B. POWER OF APPOINTMENT
The trial court alternatively held that the SJLT was effective as an instrument Stella
Jackson created pursuant to the power of appointment she retained under the provisions of the
CJRLT.
Paragraph THIRD of the CJRLT granted the surviving testator an unlimited power of
appointment with regard to the principal of the Marital Trust, and Stella Jackson’s Disclaimer
expressly reserved the rights granted in that paragraph.
MCL 556.112(c) defines “power of appointment” as used in this area of the law:
“Power of appointment” means a power created or reserved by a person
having property subject to his or her disposition that enables the donee of the
power to designate, within any limits that may be prescribed, the transferees of
the property or the shares or the interests in which it shall be received. The term
power of appointment may include a power of amendment or revocation, but does
not include a power of sale or a power of attorney.
“[W]hen a donor grants a donee power of appointment over certain specified property, the donee
gains the right to specify who will receive that property.” In re Estate of Reisman, 266 Mich
App 522, 528; 702 NW2d 658 (2005). MCL 556.114 in turn provides, in pertinent part, as
follows:
Unless otherwise provided in the creating instrument, an instrument
manifests an intent to exercise the power if the instrument purports to transfer an
interest in the appointive property that the donee would have no power to transfer
except by virtue of the power, even though the power is not recited or referred to
in the instrument, or if the instrument either expressly or by necessary implication
from its wording, interpreted in the light of the circumstances surrounding its
drafting and execution, manifests an intent to exercise the power.
In our earlier opinion, we considered whether the SJLT might be considered an exercise
of Stella Jackson’s power of appointment and concluded that “[a]lthough Stella Jackson retained
all rights given to her under paragraph THIRD of the CJRLT, which includes ‘the power to
appoint all or any part of the principal of the Marital Trust[,]’ it is impossible to ascertain from
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the SJLT any intent to make such an appointment in creating the SJLT.” In the Matter of the
Clifford W Jackson & Stella D Jackson Revocable Living Trust, unpub op at 10. The
granddaughters argue that this latter statement “clearly appears to be inviting an MCL 556.114
analysis by the Probate Court upon remand.” We conclude otherwise. Had this Court identified
inconclusive hints at, or perhaps conflicting indications regarding, such intention, then the trial
court on remand might have reasonably interpreted this Court’s decision as recognizing the
existence of a question that might be answered on remand. But “impossible to ascertain . . . any
intent to make such an appointment” means there was no indication whatsoever of an exercise of
the power of appointment. In fact, this Court was not identifying the existence of any such
question, but rather the lack of one. This Court did not need to fall back on MCL 556.114’s
default where a donee purports to transfer an interest that the donee would otherwise have no
power to transfer, because this Court was satisfied, in light of the circumstances surrounding the
drafting and execution of the pertinent documents, that Stella Jackson was endeavoring with the
SJLT to amend and restate the CJRLT, not to establish an entirely new trust from the assets she
controlled from the Marital Trust.
In sum, this Court previously considered the possibility that the SJLT was indeed a new
and independent trust created as an exercise of Stella Jackson’s power of appointment, as set
forth in the CJRLT and retained by the terms of the Disclaimer, and rejected it. That
determination thus was, and remains, law of the case. For these reasons, we conclude this
alternative basis for the results the trial court reached on remand also departed from the law of
the case.
III. CLEAR AND CONVINCING EVIDENCE OF STELLA JACKSON’S INTENT
Appellant also challenges the trial court’s factual findings concerning Stella Jackson’s
intentions.2 We review a trial court’s findings of fact for clear error. Chapdelaine v Sochocki,
247 Mich. App. 167, 169; 635 NW2d 339 (2001). Reviewing a trial court’s factual findings for
clear error is, of course, a deferential undertaking. See In re Miller, 433 Mich. 331, 337; 445
NW2d 161 (1989). “Clear error exists where, after a review of the record, the reviewing court is
left with a firm and definite conviction that a mistake has been made.” Marshall Lasser, PC v
George, 252 Mich. App. 104, 110; 651 NW2d 158 (2002). However, the challenged findings
required satisfying the stringent evidentiary standard of clear and convincing evidence. See
MCL 700.7415. Our Supreme Court has described clear and convincing evidence as evidence
that “produce[s] in the mind of the trier of fact a firm belief or conviction as to the truth of the
allegations sought to be established,” in other words “evidence so clear, direct and weighty and
convincing as to enable [the factfinder] to come to a clear conviction, without hesitancy, of the
truth of the precise facts in issue.” In re Martin, 450 Mich. 204, 227; 538 NW2d 399 (1995)
(internal quotation marks and citation omitted).
The trial court clearly erred in finding clear and convincing evidence that Stella Jackson
intended to make two distributions of $250,000 to her granddaughters. At the evidentiary
2
Although our resolution of the law of the case issue makes this issue unnecessary to decide, we
do so anyway for the sake of completeness.
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hearing, none of the witnesses were able to testify that Stella Jackson intended to duplicate gifts.
Particularly, Andrea Jackson, Holly Jackson, and Patricia Seelen could not recall having a
discussion with Stella Jackson regarding any intent to distribute an additional gift of $250,000 to
the granddaughters. Larry Argall, the certified public accountant who addressed the tax concerns
after Clifford’s death, Ken Seavoy, the attorney who drafted the Disclaimer and the SJLT, and
Mary Nurmi, the trust officer who assisted in administration of the CJRLT, could either not
recall discussing or never discussed with Stella Jackson whether she intended to give each
granddaughter $250,000 or $500,000 upon her death. The only person that was able to testify
regarding Stella Jackson’s intent was John Jackson, who testified that Stella Jackson did not
intend to make two distributions to the granddaughters. Furthermore, the SJLT itself does not
indicate that Stella Jackson had the intent to duplicate gifts to the granddaughters. The first page
of the SJLT includes the announcement, “IT IS AGREED THAT THE [CJRLT] is amended and
restated in its entirety to read as follows,” thus indicating that Stella Jackson did not intend to
create a new, duplicate gift of $250,000 to each granddaughter, but rather indicating that her
intent was to merely restate her original gift of $250,000 to each granddaughter. Accordingly,
the trial court clearly erred in finding clear and convincing evidence that Stella Jackson intended
to make two distributions of $250,000 to her granddaughters.
Reversed and remanded for entry of an order consistent with this opinion. We do not
retain jurisdiction. Appellant may tax costs having prevailed in full on appeal. MCR 7.219(A).
/s/ Michael J. Kelly
/s/ Christopher M. Murray
/s/ Douglas B. Shapiro
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